| Indicator | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥9215.9B | ¥6954.2B | +32.5% |
| Operating Income | ¥446.7B | ¥489.7B | -8.8% |
| Ordinary Income | ¥649.7B | ¥662.2B | -1.9% |
| Net Income | ¥200.5B | ¥206.0B | -2.7% |
| ROE | 4.4% | 5.1% | - |
For the fiscal year ended March 2026, Revenue was ¥9215.9B (YoY +¥2,261.7B +32.5%), Operating Income was ¥446.7B (YoY -¥43.0B -8.8%), Ordinary Income was ¥649.7B (YoY -¥12.5B -1.9%), and Net Income attributable to owners of the parent was ¥200.5B (YoY -¥5.5B -2.7%). Revenue achieved a large increase of over 30%, but Operating Income declined due to a drop in gross margin (9.6%, down -2.8pt from 12.4% in the prior year) and an increase in SG&A expenses (+¥68.1B). Equity-method investment income of ¥224.6B (prior year ¥180.1B) supported Ordinary Income, limiting the decline at the non-operating stage. The result was a revenue-up, profit-down profile.
[Revenue] The large revenue increase to ¥9215.9B (YoY +32.5%) was driven mainly by the core Lease & Installment segment (93.7% of revenue composition), which expanded sharply to ¥8,636.0B (+33.8%). This segment increased lease handling across a wide range of areas including real estate, industrial machinery, and transportation equipment, recording ¥1,069B of revenue (11.6% of total revenue) for a dedicated SPC for J-U-L (Jay You El) as a major client. The Finance segment grew modestly to ¥453.3B (+3.6%), and Other segments (power generation business, used property trading, etc.) doubled year-on-year to ¥146.3B. External customer revenue was over 90% domestic, with limited overseas expansion. Top-line expansion was driven by business-area expansion and larger deal sizes, showing marked volumetric growth.
[Profitability] Gross profit was ¥888.6B (prior year ¥863.4B, +2.9%), markedly lagging revenue growth (+32.5%), and gross margin deteriorated to 9.6% (prior year 12.4%, -2.8pt). The rise in cost of sales ratio was mainly due to increased funding costs (interest expense of ¥69.8B, up from ¥46.8B, +49.4%) and delayed pass-through of higher costs. SG&A expenses increased to ¥441.9B (prior year ¥373.8B, +18.2%), with personnel costs and system investments expanding in line with revenue growth. As a result, Operating Income declined to ¥446.7B (-8.8%), and Operating Margin fell to 4.8% (prior year 7.0%, -2.2pt). At the non-operating level, equity-method investment income of ¥224.6B (prior year ¥180.1B, +24.7%) contributed, and together with dividend income received of ¥7.8B (prior year ¥10.2B) the company generated ¥232.4B of non-operating income. After subtracting interest expense of ¥69.8B, Ordinary Income was ¥649.7B (-1.9%), narrowing the reduction. Extraordinary income included gain on sale of investment securities of ¥42.9B (prior year ¥4.0B) and extraordinary losses included impairment losses on investment securities of ¥12.5B (prior year ¥0.4B), resulting in a net positive extraordinary contribution of ¥30.4B. Pre-tax income was ¥668.0B (prior year ¥658.7B, +1.4%); after deducting income taxes and other of ¥179.3B (effective tax rate 26.8%) and non-controlling interests of ¥12.6B (prior year ¥28.6B), Net Income attributable to owners of the parent was ¥200.5B (-2.7%). Net margin declined to 2.2% (prior year 3.0%, -0.8pt). The revenue-up, profit-down structure was mainly caused by higher funding costs in a rising-rate environment, lags in passing through costs, and narrowing deal spreads due to deal mix changes. Equity-method investment income limited the final decline, but improving core profitability remains an issue. Conclusion: revenue up, profit down.
The Lease & Installment segment posted Revenue of ¥8,636.0B (YoY +33.8%), Operating Income of ¥268.5B (-5.3%), and margin of 3.1% (prior year 4.4%, -1.3pt). This core segment accounted for 93.7% of revenue and 58.6% of profit, yet despite revenue growth experienced an operating decline as deal spread compression and cost increases pressured profitability. The Finance segment recorded Revenue of ¥453.3B (+3.6%), Operating Income of ¥170.1B (-28.6%), and margin of 37.5% (prior year 54.4%, -16.9pt). Although Finance maintains a high margin historically, deal profitability deterioration led to a significant decline. Other segments posted Revenue of ¥146.3B and Operating Income of ¥19.3B (margin 13.2%), achieving marginal profit growth. Allocation of corporate expenses was -¥11.2B (prior year -¥46.0B), narrowing and indicating improved head office cost efficiency. The decline in profitability of the two main segments is the primary driver of consolidated operating decline, with the drop in Finance margin especially notable. Improving segment margins requires rigorous spread management and selection of higher-margin deals.
[Profitability] Operating Margin 4.8% (prior year 7.0%, -2.2pt) and Gross Margin 9.6% (prior year 12.4%, -2.8pt) pressured overall profitability. ROE 4.4%, ROA 1.6% (on Ordinary Income basis) are typical for financial/lease industry but declined year-on-year. [Cash Quality] Operating Cash Flow (OCF) was -¥184.1B, with OCF/Net Income at -0.92x, indicating weak cash conversion of earnings; this is mainly due to deduction of non-cash equity-method gains and an increase in working capital (accounts receivable increase -¥46.1B). Income taxes paid of ¥207.9B and interest paid of ¥405.7B (including non-operating) accelerated cash outflows. Interest coverage was 6.4x (EBIT ¥446.7B / interest paid ¥69.8B), above typical thresholds but down from 10.5x in the prior year. [Investment Efficiency] Total asset turnover 0.22x; of total assets ¥4.18T, lease receivables and investment assets are ¥1.01T and marketable securities ¥477.8B, comprising the bulk of assets. Goodwill ¥100.8B (prior year ¥42.1B, +139.3%) reflects active M&A. [Financial Soundness] Equity Ratio 10.9% (shareholders’ equity ratio 10.3%), D/E ratio 8.19x, Debt/Capital ratio 81.1% indicate high leverage. Current ratio 131.0% and quick ratio 131.0% appear sound superficially, but most current assets are lease receivables and marketable securities, limiting immediate liquidity. Cash and deposits ¥889.4B vs. short-term liabilities (CP, short-term borrowings, current portion of long-term debt, etc.) of ¥1.99T, cash/short-term liabilities ratio 4.5% shows high reliance on short-term rollover. Long-term borrowings ¥1.19T, bonds ¥413.2B, securitized bonds ¥82.8B show diversified funding. Interest-bearing debt dependency 76.0%, retirement benefit obligations ¥2.33B are immaterial.
Operating Cash Flow was -¥184.1B (improved 95.3% from -¥3,933.2B in prior year) and remained below Net Income of ¥200.5B, resulting in negative cash conversion. The main cause was that equity-method investment income of ¥224.6B is non-cash and deducted, leaving an OCF subtotal of ¥386.6B, and increases in working capital (accounts receivable increase -¥46.1B) and income taxes paid ¥207.9B caused cash outflows. Interest and dividend received totaled ¥42.8B against interest paid of ¥405.7B, netting ¥362.9B of cash outflow. Investing Cash Flow was -¥1,066.6B (prior year -¥531.8B), primarily due to acquisition of investment securities -¥1,068.9B. Proceeds from sale of securities ¥179.3B partially offset, but net investment for portfolio expansion was substantially in excess. Including increases in tangible fixed assets, capital was concentrated on growth investments. Free Cash Flow (OCF + Investing CF) was -¥1,250.7B. Financing Cash Flow was +¥1,463.7B, with funding raised through long-term borrowings ¥5,813.7B, bond issuance ¥735.2B, and short-term borrowings increase ¥536.9B. At the same time, long-term borrowings repayments ¥3,609.0B, bond redemptions ¥641.2B, and net CP decrease ¥1,133.4B were executed. After dividend payments of ¥146.9B, net financing was +¥1,463.7B. Cash and deposits rose by ¥208.1B from the opening balance of ¥679.9B to ¥889.4B at period-end (including forex impact -¥4.9B and consolidation scope changes +¥2.9B). The funding structure is dependent on external financing, premised on using leverage to expand investments and continuing rollover. Recovering OCF requires monetization of equity-method investments and shortening deal collection cycles.
Of Ordinary Income ¥649.7B, Operating Income was ¥446.7B (68.8%) and equity-method investment income was ¥224.6B (34.6%), meaning non-operating contributions accounted for over 30% and the company is highly dependent on non-core earnings. Equity-method investment income is subject to investee performance and market conditions, posing issues for stability and predictability. Non-operating income totaled ¥280.3B (of which equity-method ¥224.6B and dividend income received ¥7.8B), accounting for 43.2% of Ordinary Income; after deducting non-operating expenses of ¥77.4B (interest paid ¥69.8B), the net contribution was +¥202.9B. At the extraordinary level, gains on sales of investment securities ¥42.9B, valuation losses ¥12.5B, and loss on disposal of fixed assets ¥0.3B resulted in a net positive extraordinary contribution of ¥30.4B. Extraordinary items are temporary, but this term saw disposal gains lifting profit. Comprehensive income was ¥570.9B (Net Income ¥200.5B + Other Comprehensive Income ¥82.2B), reflecting foreign currency translation adjustments ¥1.9B, valuation difference on available-for-sale securities ¥17.4B, deferred hedge gains/losses ¥18.3B, retirement benefit adjustments ¥5.6B, and equity-method investees’ OCI share ¥39.1B. Comprehensive income significantly exceeded Net Income, suggesting improvement in unrealized gains/losses. From an accrual perspective, there is a large divergence between OCF -¥184.1B and Net Income ¥200.5B, driven by non-cash equity-method income and working capital increases. Earnings quality depends on monetization of equity-method gains and sustainability of core deal spreads; in the short term, one-off gains from disposal of investment securities also contributed. Medium- to long-term stability requires improvement in operating margins.
For FY ending March 2027, the company forecasts Operating Income of ¥400.0B (YoY -10.5%), Ordinary Income of ¥670.0B (+3.1%), and Net Income attributable to owners of the parent of ¥520.0B (prior year ¥200.5B, thus +159.5% versus Net Income; Ordinary Income comparison is +3.1%). EPS forecast ¥170.96 and dividend forecast ¥26.00. The company plans an operating decline but expects increases in Ordinary and Net Income, assuming stable contributions from equity-method investment income and non-operating income. Compared with current-year results (Operating Income ¥446.7B, Ordinary Income ¥649.7B, Net Income ¥200.5B), the guidance is conservative for Operating Income (-10.5%), modestly positive for Ordinary Income (+3.1%), and assumes a material increase in Net Income. Progress rates stand at Operating 111.7%, Ordinary 97.0%, Net Income 38.6%; Operating and Ordinary have already progressed close to full-year targets, while Net Income progress is low due to the impact of extraordinary items and tax effects. The full-year guidance is based on conservative assumptions, incorporating second-half operating decline while relying on continued equity-method contributions to secure Ordinary and Net Income. Market conditions (rates, FX) and investee performance variability are keys to achieving guidance. Dividend forecast ¥26 assumes maintaining the year-end portion of the current annual dividend (current-year total ¥51.00: interim ¥25.00 + year-end ¥26.00), and payout ratio is expected to remain in the 30% range.
This fiscal year’s total dividend was interim ¥25.00 and year-end ¥26.00, totaling ¥51.00, with a payout ratio of 30.4% (based on EPS ¥169.98). This is a significant increase (+155.0%) from the prior year’s annual dividend of ¥20.00. Total dividends amounted to ¥146.9B against Net Income of ¥200.5B, a payout ratio within a reasonable range. However, FCF was -¥1,250.7B and dividends were financed through external funding, raising questions about sustainability based on cash generation. The FY2027 dividend forecast of ¥26.00 (only disclosed as a year-end amount) represents maintenance of the year-end level. The dividend note references effects of “issuance of new shares and introduction of share-based trust system,” indicating incorporation of capital policy changes. There were no share buybacks; Total Return Ratio is the same as the payout ratio at 30.4%. Dividend sustainability depends on maintaining earnings (continuation of equity-method investment income) and preserving Equity Ratio (for rating and funding-cost management). Shareholders’ equity ¥454.47B, Equity Ratio 10.9% can withstand the dividend increase, but high leverage means earnings volatility directly affects capital and dividend capacity. If the company achieves the guidance Net Income of ¥520B next fiscal year, maintaining a payout ratio in the 30% range would allow annual dividends in the ¥50s. The company appears to prioritize allocating funds to growth investments while balancing capital efficiency and shareholder returns.
Interest rate rise / spread compression risk: Interest expense ¥69.8B (prior year ¥46.8B, +49.4%) and sharply increased funding costs led to a decline in gross margin to 9.6% (prior year 12.4%, -2.8pt). High short-term funding dependence (short-term liabilities ratio 39.2%) means that if rollover rates on CP and short-term borrowings increase, spreads will be further compressed. Interest coverage is 6.4x, above thresholds but down from 10.5x last year, reducing interest resilience. Given the leveraged business model, central bank policy shifts or unexpected market rate rises pose a high risk to profitability.
Liquidity / funding risk: Cash and deposits ¥889.4B versus short-term liabilities ¥1.99T yields cash/short-term liabilities ratio 4.5%, demonstrating high dependence on CP and short-term borrowings rollover. A significant maturity mismatch (long-term assets funded by short-term borrowing) means that in market stress, rollover may become difficult and liquidity crisis could ensue. With D/E ratio 8.19x and Debt/Capital ratio 81.1%, high leverage could trigger rating downgrades and wider credit spreads, raising funding costs and shrinking funding capacity. OCF -¥184.1B and FCF -¥1,250.7B indicate insufficient internal cash generation, making continued external funding essential for operations.
Equity-method investment / market fluctuation risk: Equity-method investment income ¥224.6B accounted for 34.6% of Ordinary Income ¥649.7B, so investee performance volatility significantly affects consolidated profit. With investment securities balance ¥4,952.6B (prior year ¥3,772.1B, +31.3%), valuation loss risk increases in adverse markets (this term recorded valuation losses of ¥12.5B). Equity-method gains are non-cash, contributing to OCF -¥184.1B and limiting cash conversion; delays in realizing investments or investee operating deterioration can strain liquidity. Of AOCI ¥64,643 million, valuation difference on available-for-sale securities amounts to ¥22,829 million, and rapid changes in equity/debt markets could impair capital. Concentration in deals (major customer SPC revenue ¥1,069B, 11.6% of revenue) also suggests potential for losses to crystallize if specific counterparties deteriorate.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 4.8% | 8.8% (4.0%–20.0%) | -4.0pt |
| Net Margin | 2.2% | 4.3% (0.6%–11.3%) | -2.1pt |
Profitability is below the industry median, and both Operating Margin and Net Margin have room for improvement.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 32.5% | 2.1% (-4.5%–6.9%) | +30.4pt |
Revenue growth substantially exceeds the industry median, placing the company among the top performers in top-line expansion.
※ Source: Company compilation
Room to improve the revenue-up, profit-down structure: Despite a rapid revenue increase of +32.5%, Operating Income declined -8.8%, indicating notable deterioration in profitability. Gross margin down -2.8pt and Operating Margin down -2.2pt were driven by rising rates and pass-through lags, while equity-method income +24.7% limited the final decline. Next fiscal year guidance expects Operating -10.5% and Ordinary +3.1%, indicating profit plans reliant on non-operating contributions. Recovery of core spreads (spread management and selection of high-margin deals) is key to medium-term earnings stability. Recovery of OCF (from -¥184.1B to positive) and improvement in ROIC (from 1.4% to levels above cost of capital) are prerequisites for sustaining valuation.
Monitor high leverage and short-term funding dependence: D/E ratio 8.19x and cash/short-term liabilities 4.5% mean CP and short-term borrowings rollover is the lifeline of liquidity. Interest coverage 6.4x (prior year 10.5x) shows reduced interest resilience. Because growth investments are funded through external financing (Financing CF +¥1,463.7B), changes in the financial environment (wider credit spreads, shrinking CP market) constrain business plans. Although Equity Ratio 10.9% improved from 10.3% last year, preserving regulatory capital buffers and diversifying funding (raising long-term debt ratio) are important.
Balance between dividends and investments: Payout ratio 30.4% and annual dividend ¥51 (YoY +155.0%) strengthen shareholder returns but FCF -¥1,250.7B indicates internal funds are insufficient and dividends are covered by external funding. Even if next-year Net Income ¥520B is achieved, maintaining payout ratio in the 30% range is feasible, but sustainability requires OCF to turn positive and progress in investment recoveries. Investment securities balance +31.3% and goodwill +139.3% show acceleration of growth investments; timing of investee IRR realization and monetization of equity-method investments (EXIT/dividend receipts) will be focal points for future capital allocation. Continuous monitoring of capital efficiency (ROE 4.4%, ROIC 1.4%) and the balance between leverage and liquidity risk is necessary on a quarterly basis.
This report is an AI-generated financial analysis document created by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm based on public financial statements. Investment decisions are your responsibility; please consult a professional advisor as needed before making investment decisions.